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The "Solar Panel" Effect on Home Sales

Our recent podcast on “conspicuous conservation” looked at the “Prius Effect” — that is, how valuable it is for green-leaning consumers to signal their devotion to the environment by driving an obviously-hybrid Toyota Prius. (BTW, you can also fake it with an “instant hybrid conversion kit.”) The episode was based on an interesting paper by Alison and Steve Sexton called “Conspicuous Conservation: The Prius Effect and Willingness to Pay for Environmental Bona Fides.” It included some talk about solar panels as well, and how some people mount them on the street-facing side of their homes even though the sun shines more strongly on the rear.

Now there’s a new related paper called “Understanding the Solar Home Price Premium: Electricity Generation and ‘Green’ Social Status,” by Samuel Dastrup, Joshua S. Graff Zivin, Dora L. Costa, and Matthew E. Kahn. PDF is here; from the abstract:

This study uses a large sample of homes in the San Diego area and Sacramento, California area to provide some of the first capitalization estimates of the sales value of homes with solar panels relative to comparable homes without solar panels. Although the residential solar home market continues to grow, there is little direct evidence on the market capitalization effect. Using both hedonics and a repeat sales index approach we find that solar panels are capitalized at roughly a 3.5% premium. This premium is larger in communities with a greater share of college graduates and of registered Prius hybrid vehicles.

One point that’s made in the podcast is that some very green communities (the Bay Area in Calif., e.g.), where solar panels are in high demand, aren’t very good locales for solar energy — whereas a less-green community like Bakersfield is super-sunny. We have a proposed solar-panel-swapping solution to that…

James

Ah, but have you ever been in Bakersfield in the winter? See the Wikipedia article on "tule fog": http://en.wikipedia.org/wiki/Tule_fog

Rossouw

July 16, 2011 @ 2:02pm

The only reason people ever put up solar panels is to be more environment friendly .... Not economic reasons....

Michael

July 15, 2011 @ 5:58pm

There's no citation for the assertion that people install solar panels on the shady street side of their roof, nor any indication of how this is "known" or who knows it.

Solar insolation is a key factor in determining the payback period for a home system (obviously) and no solar installer would ever recommend that someone install on the "wrong" side of their roof. I work for a solar trade association and I've never heard of this happening (which isn't to say that it hasn't).

Most people install solar for primarily economic reasons. Absent any actual evidence, I'd assume that this is a tiny, tiny number of extremely wealthy solar customers who don't care if their system ever breaks even. If these people even exist in any significant number, they certainly aren't typical solar customers.

caleb b

July 15, 2011 @ 7:15pm

"Most people install solar for primarily economic reasons."

Really? They might tell themselves that, but most houses that I see that have solar panels are 3,500 sq ft plus. I question that saving money is their primary goal.

Michael

July 15, 2011 @ 8:30pm

Well, it's unlikely that the houses you happen to have seen are a representative sample of the solar installations across the U.S., most of which (on a capacity basis) are non-residential. There was around 2,000 megawatts of installed PV at the end of 2010 and only 637 megawatts were on homes. The biggest growth in solar recently has been in commercial and utility-scale markets. With power-purchase agreements and solar leases, a lot of customers can be cash-flow positive right away.

No need to convince yourself that you're installing solar for economic reasons if your installation quote does it for you.

BSK

July 15, 2011 @ 9:27pm

My school put them on the roof of the gym. There was some buzz about it and our Head mentioned it as part of our efforts to be green, but you can't see them unless you're on the roof or in a helicopter. Yea, the publicity is good, but we get tons of sun and have saved quite a bit of money already.

JP

July 15, 2011 @ 6:02pm

It always bugs me when people take something that is for good and make a trend out of it. Once the trend is forgotten, the movement is too. Living "green" is good, but doing things like buying a Prius just to impress people is not.

Does anyone know of the impact of buying a new hybrid, over just keeping your old car? You know the reduce and reuse part.

kevin

July 15, 2011 @ 8:25pm

I don't "know" but I know a friend to works in renewable energy policy, and she says to keep your car or - gasp - just buy a small gass burning car like a Mini or a Honda Fit and it is better anyway.

adam

July 15, 2011 @ 10:52pm

this proposition is premised on the idea that people go solar to feel good, as opposed to save money. while there's often a mix of motivations, the fact remains that residential solar in CA makes for very good personal economics. it's a business, not a cause.

Joe

July 16, 2011 @ 3:07pm

Altruism means that you are truly sacrificing. Consequently the greens who purchase Prius cars may be conspicuous conservation buyers but they are not altruists. They are getting emotional benefits and reduced transportation time benefits. The browns on the other hand are rational conservation buyers. The difference is that they are not influenced by Hollywood celebrities displaying their conspicuous conservation purchases. The browns are grounded in reality and look for economic benefits. They shrug off the touchy feely stuff for solid fact based cold economic benefits. So you won’t find browns buying electric cars, wind mills, or solar cells. Simply put, with today’s technology these just don’t make sense.

SFCeltic

July 16, 2011 @ 3:53pm

My parents live in the SF East Bay right next to the fog belt.

They have a net zero bill on electricity usage from their newly installed solar panels. Prior to that the were getting $375+ electric bills/month.

As soon as I am forced to re-roof my home I will also install solar panels.

Rob

July 16, 2011 @ 4:29pm

The primary reason for all of our installations in Orange County California have been for financial reason's. Our customers are saving anywhere from $60,000 on a modest size home to $250,000 on large home in twenty five years with an average payback period of seven years. Our customers are enjoying 9-24% guaranteed ROI's on the only home improvement available that pays you back. We recently had a customer forego putting solar on the front of the home for the lower production rear facing orientation and they will only save $200,000 instead of $230,000 in energy costs. The environmental benefits of producing clean renewable energy is a by product of making a wise financial decision. It's sunshine, it's free, it's a no brainer-folks!